Report: “Low-Crime Tax” Keeps For-Profit Prisons Profitable

The Idaho Correctional Center south of Boise, Idaho. A group of eight inmates at the facility filed a lawsuit in 2012, contending that poor management and chronic understaffing led to an attack in which they were jumped, stabbed and beaten by members of a prison gang. (AP Photo/Charlie Litchfield, File)

Compare these two tales of corruption that illustrate how the opportunity to turn a profit distorts our supposedly impartial judicial system.

In 2008, a scandal rocked Wilkes-Barre, Pennsylvania, when the FBI charged two judges, Mark Ciavarella and Michael Conahan, with taking kickbacks from a private juvenile detention facility in exchange for handing down lengthy prison terms to young offenders. Robert Mericle, who had built two for-profit detention centers, and a businessman named Robert Powell paid the judges almost $3 million over a three-year period to help smooth the way for the construction of the facilities and to keep their beds full.

According to an appeals court ruling, “over the course of several years, Ciavarella committed hundreds of juveniles to detention centers co-owned by Powell, including many who were not represented by counsel.” Hundreds of young lives were ruined. Kids, including first-time offenders, were sentenced to juvenile facilities for “offenses” like mocking an assistant principal on Myspace, taking loose change from unlocked cars and trespassing in an abandoned building. In one tragic incident, a star high-school wrestler who had never been in trouble before was sentenced to months behind bars for a minor charge of possessing drug paraphernalia. He missed his senior year of high-school, and became bitter and depressed. His mother would blame his suicide several years later on the corrupt judges.

“By the summer of 2008,” reads the appeals court ruling, “Ciavarella and Conahan, aware that they were under criminal investigation, met with Mericle and Powell to collaborate on their stories, discuss how to mitigate the effects of damaging witnesses, and encourage the destruction of records.” What the others didn’t know is that Powell was cooperating with authorities and wore a wire during the discussion. Judge Ciavarella was sentenced to 28 years in federal prison. Judge Conahan got over 17 years. Robert Powell received a sentence of 18 months as a result of a plea bargain. Robert Mericle pled guilty and awaits sentencing.

When you deliver boxes full of cash to judges in exchange for keeping your private prison profitable and your beds full – when there’s a clear quid-pro-quo – then the FBI will investigate and the perpetrators will likely end up in prison. But a new report issued this week by In the Public Interest, a government watchdog group, shows that you can achieve a similar result through less direct means – lobbying and campaign financing – and it’s perfectly legal.

The report found that 2/3 of a sample of state contracts with private prison companies have “occupancy clauses” that guarantee the companies’ facilities will remain full. The minimum occupancy requirements varied from 80 to 100 percent, with 90 percent being the most common threshold.

With crime rates dropping nationwide, taxpayers are forced to pay the companies compensation if their prison populations fall below the minimum. In some cases, state-owned prisons are now under-populated as detainees have been shifted to for-profit facilities in order to meet these quotas.

According to the report:

These clauses can force corrections departments to pay thousands, sometimes millions, for unused beds — a “low-crime tax” that penalizes taxpayers when they achieve what should be a desired goal of lower incarceration rates. The private prison industry often claims that prison privatization saves states money. Numerous studies and audits have shown these claims of cost savings to be illusory, and bed occupancy requirements are one way that private prison companies lock in inflated costs after the contract is signed.

By contractually requiring states to guarantee payment for a large percentage of prison beds, the prison companies are able to protect themselves against fluctuations in the prison population. These provisions guarantee prison companies a consistent and regular revenue stream, insulating them from ordinary business risks. The financial risks are borne by the public, while the private corporations are guaranteed profits from taxpayer dollars.

The report offers examples of some nightmarish results of the cost-cutting measures these private facilities often impose – including housing prisoners in deplorable living conditions, overcrowding, violence, mismanagement and escapes.

There are no boxes of cash involved. But as the report notes, “the for-profit prison industry works hard to ensure harsh criminal laws and elect policymakers that support its agenda.”

The Center for Responsive Politics reports that [Corrections Corporation of America] spent $17.4 million in lobbying expenditures from 2002 through 2012, while GEO Group spent $2.5 million from 2004 to 2012. Similarly, CCA spent $1.9 million in political contributions from 2003 to 2012, and Geo Group spent $2.9 million during the same time period.

But government shouldn’t be in the business of keeping an unsustainable industry afloat. And yet that’s just what they’ve done in the past. In 2008, Leslie Berestein reported for the San Diego Union-Tribune that the country’s leading private prison firms – CCA, Geo Group, Halliburton and Management and Training Corp. – lobbied lawmakers to pass harsh new immigration laws, including changes “in the way that immigrant detainees – illegal immigrants, asylum-seekers, legal residents appealing deportation and others – are held.”

“The private prison industry was on the verge of bankruptcy in the late 1990s, until the feds bailed them out with the immigration-detention contracts,” said Michele Deitch, an expert on prison privatization with the Lyndon B. Johnson School of Public Affairs at the University of Texas in Austin.

As increasingly tough immigration laws have called for the detention and deportation of ever more immigrants, the demand for bed space by immigration authorities has helped turn what was once a dying business into a multibillion-dollar industry with record revenue and stock prices several times higher than they were eight years ago.

According to Aviva Shen at Think Progress, the private prison industry spent $45 million on immigration lobbying alone. They now enjoy a $5.1 billion industry, with virtually no risk – the risk instead is borne by American taxpayers and those more likely to end up behind bars to fill quotas.

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